Professional Liability Guide

CHAPTER 1 – DUTIES

Littler v Price relied on the decision of the Full Court of the Federal Court in Fox v Everingham and Howard , in which it was held that a general retainer assumed by the solicitors to act in the client’s interests when entering into a contract to purchase a property required the solicitors to: (a) ‘Go through the contract with the Foxes and explain the salient points to them. (b) Explain to the Foxes provisions of the contract, which were in an unusual form and which might affect their interests as they were known by the respondents to be. (c) Give attention, before the contract was signed by the Foxes, to the question of whether it, from their point of view, contained adequate provisions to protect them against a variety of contingencies which might reasonably have been foreseen as likely to arise if things did not go as expected.’ 9 ‘In cases such as the present a solicitor is paid not only for what he in fact does, but also for the responsibility he assumes in trying to protect clients from financial loss if things go wrong. It is easy enough to act for people if things go as they are expected to. But it is because the unexpected will sometimes happen that solicitors are rightly paid the fees which they command. The corollary of this proposition is that if they do not measure up to the standard which is required of them, they are liable for breach of the obligation which they owe to clients. The standard required of them is not an absolute one.’ 10 The Full Federal Court in Fox concluded: The client in that case complained that the solicitor had failed to advise the company to arrange a pre-settlement inspection of the business. Nyland J observed that, on the evidence, the acquisition was controlled primarily by the client, who often acted directly without the solicitor’s involvement or knowledge, only instructing the solicitor on discrete aspects of the acquisition. This evidence could not support the proposition that the solicitor had been instructed to act and offer advice on all aspects of the transaction. 12 He concluded the solicitor’s retainer was indeed a limited one. In Artistic Builders Pty Ltd v Nash, 13 the New South Wales Supreme Court considered an action of negligence against the partners of a law firm. The partners allegedly failed to provide warnings and advice about the securities proffered to support advances made by the plaintiffs of several million dollars on a staged development; the advances were to be secured by three mortgages. The plaintiffs claimed that the solicitors had failed to provide adequate advice about whether the securities proffered were acceptable, and substantial losses resulted. The negligence case against the solicitors failed on a limitation issue. Nevertheless, the case contains useful statements for determining the parameters of a solicitor’s retainer. In the lengthy judgment, Hall J observed that: However, Nyland J in Tasmanian Sandstone Quarries Pty Ltd v Legalcom Pty Ltd 11 took a different view, establishing that the retainer was limited.

9 (1983) 50 ALR 337, 341. 10 Ibid. 11 (2010) 270 LSJS 519. 12 Ibid [36]–[41]. 13 [2010] NSWSC 1442.

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